Updated from 3:21 p.m. EDT
expanding menu of products became even more diverse Wednesday after the retailer announced that it had added an online camera and photo store to its Web site and formed a partnership with a photography company.
The service, supported by its newest Internet ally, privately held
, allows Amazon.com visitors to shop for cameras, camcorders and printers, as well as accessories like digital memory cards, film, batteries and photo editing software.
Ofoto will pay Amazon.com an undisclosed amount over three years for access to its millions of Web shoppers, and Amazon.com will have the option to acquire up to a 5% stake of Ofoto, said Carl Gish, Amazon.com's general manager of electronics.
The camera service adds products like Soviet-era spy cameras and night-vision goggles, as well as more mundane products like film to a site that already offers shoppers everything from gas grills to shampoo to computer software. But it's the eclectic nature of the Web site that has prompted concern with at least one analyst who follows the company.
Bad Deal or Clever Move?
Lauren C. Levitan of
said in a research note Wednesday that she feared that the company, having evolved from an online bookseller to a purveyor of CDs, tools, electronics and dozens of other goods, is sacrificing efficiency as it marches on.
Other analysts, however, said they believe, despite some reservations, that Amazon.com's business model, which relies on a number of portal agreements with other companies, would eventually prove to be a clever one. Even Levitan acknowledged that Amazon.com's approach could ultimately generate significant long-term profits.
"Considering the economics of distribution, you want to be big and get a lot of traffic," said Kevin Silverman, who tracks Amazon.com for
. "Amazon wants to be a portal for all online shoppers."
Amazon.com, unlike anyone else in the Internet universe, is poised to tackle the challenge of distributing an array of products, from heavy to light, from big to small, to consumers in an efficient manner, added Silverman, who predicted that Amazon.com will sell apparel next.
Amazon.com spent $300 million in 1999 to finish building a distribution infrastructure that would allow it to accommodate the wide-ranging demands of consumers, said Lizzie Allen, a spokeswoman for Amazon.com.
Anthony Gikas of
U.S. Bancorp Piper Jaffray
suggested that it is inevitable perhaps that the company would have to scale back its expansion, but ultimately he said it should be able to figure out what online plan works more quickly than anyone else.
"It's unlikely they'll sell everything under the sun," Gikas said. "My guess is that over the long term, the company will find the best possible opportunities, and those opportunities will rise to the top. And if certain businesses are unsuccessful, they'll get out of those."
An unfavorable climate for Internet companies, many of which are struggling financially, also has contributed to concerns about the company's retail agreements. Amazon.com has renegotiated some of its deals, at a time when a few of its partners are falling on hard times.
Amazon.com itself has watched its stock decline from around $90 at the beginning of the year to a low of less than $28 later on. On Wednesday, Amazon.com finished 94 cents, or 3%, at $36.
, a privately held company that sells cars online, initially had said that it would pay $82.5 million over five years for a partnership that would enable Amazon.com visitors to browse an online showroom and take advantage of trade-in and financing options. But in August, the two acknowledged that they had scaled back their arrangement. The companies finally unveiled a
deal in which Greenlight.com would pay $15.25 million over two years. At the same time, Amazon.com said it would acquire a 5% stake of the company.
Yet an alliance with Internet home furnishing company
did not work out so well. After failing to raise enough capital, Living.com announced in
August that it would file for bankruptcy, lay off 275 employees and shut down its Web site.
As part of that pact, Living.com had agreed to pay Amazon.com $145 million over five years, while Amazon.com said it would take an 18% stake of the online firm. But the company already had accounted for the loss, and analysts concurred that the company's collapse would not have much of an effect on Amazon.com's bottom line.
And then late last month, another online partner, sporting goods outlet
, said it was laying off 20 employees, about a third of its staff, as part of a restructuring effort and that Ken Blue, its president, had stepped down.